Trump turns to H-1B advocates for advice

Patrick ThibodeauJanuary 20, 2017

Trump's CEO advisers offshore jobs, and want the H-1B cap to increase

In his campaign for president, Donald Trump tapped into the viral anger over H-1B use. The outsourcing of high-skill jobs is a "tremendous threat," he said. Disney workers who trained visa-holding replacements spoke at some of his rallies.

But soon after the election, President-elect Trump assembled a 16-member team of CEO-level executives to advise him on job creation, including many from firms that send jobs overseas and have advocated for an H-1B cap increase.

Trump's appointments included one of the pioneers of offshore outsourcing to India: Jack Welch, the former chairman and CEO of General Electric. Also on this committee is Bob Iger, the chairman and CEO of Disney, whose offshoring of Disney IT workers was a topic at a Republican presidential candidate debate.

The chairman of the "President's Strategic and Policy Forum" is Stephen Schwarzman, the chairman and CEO of Blackstone, a private equity firm that is betting on the success of IT offshore outsourcing. Blackstone last year acquired a majority stake in Mphasis, an India-based IT services firm that is categorized by the U.S. as H-1B dependent, meaning 15% or more of its workers are on a visa.

At the time the Mphasis deal was announced, India's Economic Timeswrote this about Blackstone: "The all-cash deal reinforces" the "firm's bullish outlook on the outsourcing business as more and more global clients ship out IT jobs to emerging markets such as India and save costs."

Mphasis and Blackstone both declined to comment for this story.

Some members of Trump's advisory committee belong to groups that advocate for an H-1B cap increase. Iger, for instance, is also one of eight co-chairs of the Partnership for a New American Economy, a high-profile organization advocating for an increase in the H-1B visa cap.

Following Trump's appointments, the Partnership for New York City, a business group, issued a report (PDF) detailing five "federal priorities." One priority includes immigration reform to increase the H-1B cap and allowing U.S. companies "to hire skilled workers based on labor market demands, not fixed and arbitrary quotas."

The Partnership for New York noted in this report that six of its members were members of Trump's economic advisory committee.

The partnership wrote: "Policies that promote the continued growth and vitality of New York City and the nation will have forceful advocates on President-elect Donald Trump's recently announced Strategic and Policy Forum, chaired by partnership co-chair Stephen Schwarzman (Blackstone) and including partnership members Jamie Dimon (CEO, JPMorgan Chase), Larry Fink (CEO, BlackRock), Rich Lesser (Boston Consulting Group), Ginni Rometty (CEO, IBM) and Mark Weinberger (CEO, EY)."

The Trump committee's expertise on IT offshoring is deep. General Electric, under Welch's leadership, was one of the first firms to utilize India for offshore outsourcing.

"Welch was the pioneer of, and chief evangelist for, offshore outsourcing," said Ron Hira, an associate professor of public policy at Howard University and co-author of a book that documents the history of offshoring, Outsourcing America.

IBM's U.S. workforce has been declining for years, but in 2010 the company stopped reporting its U.S. headcount, and provided only a global headcount. Soon after being appointed to the Trump committee, IBM's Rometty announced plans to hire 25,000 workers in the next four years, but the company declined to disclose its current U.S. headcount or how many of those workers were a net addition.

Walmart CEO Doug McMillon is also on the Trump committee; the company was criticized last year by the AFL-CIO for its use of IT offshore outsourcing contractors. The company, in response, said the vast majority of IT workers were U.S. citizens.

But Trump, despite this CEO committee's preference for an H-1B cap increase, has appointed people who want the opposite to happen, namely Sen. Jeff Sessions (R-Ala.), his Attorney General nominee. Sessions is one of the Senate's leading advocates for H-1B restrictions.

"The Obama administration has failed to protect American workers," said Grassley, who has also sponsored bills seeking restrictions on the H-1B visa use. "Will you be more aggressive in investigating the abuses of these visa programs?"

Sessions responded: "It's simply wrong to think that we're in a totally open world and that any American with a job can be replaced if somebody in the world is willing to take a job for less pay."

Sessions said he will investigate the H-1B program, but said reform will require legislation.

It remains to be seen how aggressive the Trump administration will be on H-1B use, and also whether it will have much impact on U.S. firms that want to offshore jobs.

For their part, IT offshore outsourcing firms are betting on restrictions, not a cap increase, and are adjusting their business models.

"The leading Indian IT suppliers are already focusing on increased U.S. onshore investments -- and this isn't only because of the Trump fears, but also because they need more IT staff more closely aligned with customer needs and digital business models," said Phil Fersht, the CEO and chief analyst of HfS Research, which examines this market.

Fersht points to Wipro, an India-based IT services firm, as an example. It recently acquired Appirio, an Indianapolis-based cloud computing consultancy, for $500 million.

The major Indian IT services firms "have long needed to globalize their delivery base and President-elect Trump is merely an added incentive for them to do so," said Fersht.